5 User Retention Strategies to Grow Customer Lifetime Value
User retention is the act of getting members to use your product in such a way that it becomes habitual. If you retain them, then they are using your product often.
Many growth marketers consider retention the most important aspect of the funnel. Why?
Churn can cost you millions. You’ll see 4 scenarios in the below graphic: 2% net churn, 0% net churn, -2% net churn, -3% net churn. After 8 years, the 5% difference in net churn rates can result in a $500M ARR difference! (Source: Slide 23 of Social+Capital’s SaaS Secrets to Raising Venture Capital)
Leaky buckets don’t need more water. Losing users (a.k.a. churn) basically renders all your ingenious product and growth hacks useless. To retain your existing users, your leaky buckets first need to be plugged.
Focusing on retention is a cheaper way to grow, considering that acquiring new customers costs 6-7x more than retaining existing customers. It’s like Patrick Campbell says: “We’re barely even thinking about retention or monetization even though all data shows that these are much more efficient and effective at driving growth than acquisition.” Not to mention, growth is amplified when all stages of the funnel work together.
Increased user retention leads to increased customer lifetime value. The logic is simple: people who are customers longer pay for longer. With a higher lifetime value, you can afford to spend more on paid acquisition tactics. Just keep these tips in mind to make your customer acquisition math work.
User retention earns referrals and repeat buyers. Long-term users are more likely to evangelize your product. If your product is built into their weekly routine, they’re more likely to talk to their friends about it, take it into the workplace, and be an advocate for you.
With the what and why of user retention under our belt, let’s turn our attention to the how. Here are 5 user retention strategies you can build with Autopilot to drive down churn and increase customer lifetime value.
1. Onboard new users to create successful first-time experiences
Onboarding new users is the process of increasing the likelihood that new users become successful when adopting your product. The experience typically happens in the user’s first session and provides them with what they need to get started.
Your goal here is to help users see the value of your product as quickly as possible. This is called a “quick time to value”. To accomplish this, structure your onboarding to guide users to the specific events that will help them adopt your product. These are often referred to as usage thresholds, “aha!” moments, or simply key moments.
Common key moments include:
- Uploading content, creating a ticket, or adding a tracking code
- Achieving usage thresholds, like number of steps taken for a fitness device
- Non-app events, like a mandatory configuration session with an implementation manager
Think through the actions users need to take to see your product’s value. Your goal is to identify the actions that correlate with a higher likelihood of becoming a paying customer. Next, work your way backwards to implement messaging that drives that journey.
New users see this message in-app. Since launch, the company has seen a 30% increase in attendance to its new user webinar. The end result has been more trained, prepared, onboarded customers.
2. Nudge proactively to drive users to “aha!” moments
After the initial onboarding experience, your next goal is to nudge users toward additional “aha!” moments and key events.
The best way to achieve this is through event-based notifications. Facebook, as well as Twitter and LinkedIn, have mastered this tactic with email notifications that are sent when events (like updates posted, photos uploaded, and comments made) occur.
The best notifications include a call to action that drives users back into the product. This tactic can also be used for negative events, such as a failure to complete an integration. Remember, the goal is to nudge users toward more “aha!” moments and key milestones.
3. Retrieve dropoffs by rolling out the red carpet
Dropoffs are people who hit a blocker and don’t come back to your app or website. With this segment, you typically have seven days to bring resolution to their blocker before losing them for good.
You want to catch and retrieve dropoffs early. In the analytics app space, for example, adding a tracking code is a common barrier to product adoption. New Relic solved this by rewarding users who added the tracking code with a “data nerd” t-shirt.
It worked. New Relic shipped over 75,000 t-shirts and became the pioneers of swag marketing.
Other ways to retrieve dropoffs include:
- Proactive support: Link to video tips, send how-to documentation, or trigger a follow-up email to see if users who have visited your knowledge base found the answers they were looking for.
- Expert consultations: Offer a (typically paid) strategy or consultation session for free.
- Irresistible offers: Incentivize activation by sending exclusive content or physical gifts (like New Relic did with t-shirts)
Dropoffs could be considered low-hanging fruit because you’re targeting leads who’ve already engaged with you. The key is wooing them back (before it’s too late).
4. Reactivate lost users by incentivizing and inspiring them to return
Lost users are people who fell off the map for more than 30 days. If you haven’t heard from them and they haven’t logged in, it’s time to reach out and help them find their way home. Reactivation journeys are your go-to in this situation.
The two most effective approaches we’ve found are promotional offers and inspirational appeals.
Promotional offers. If a person buys once and doesn’t have a bad experience, then they’ll likely buy again. They just need to be incentivized.
To win them back, offer promotions with time-limited discounts, free access for a short period, exclusive invites, or premium content.
Check out this 15% off offer from Gap that is both enticing and time-limited.
A one-time campaign like this can bring in that spike of revenue you need just before the end of the quarter.
Inspirational appeals. If a user reaches a certain level of activity, but then stops using your product, you may need to inspire them to grow their skills, increase their reach, or implement best practices.
LinkedIn uses this approach in the email below.
The phrase “Join 1 million thought leaders like you” helps encourage recipients to continue publishing on LinkedIn’s platform.
Inspirational appeals could include personalized invitations to use valuable features or humor intended to make people chuckle—anything that helps motivate them to re-activate.
5. Educate active users to extract maximum value from your product
Education journeys increase retention by helping users get more out of your product. This happens post-onboarding and is a long-term investment in growing customer lifetime value.
Typical ongoing educational content includes:
- Monthly newsletters with feature releases and news
- Training webinars & best practices content that showcases new features, methodologies, and use cases
- Proactive customer support featuring new how-to articles and feature documentation
- Events and meetups that help users expand their product and domain expertise
The Retention Framework
Automated retention journeys aim to automatically engage and recover users in a way that is contextual and personalized based on their level of activity or experience. Regardless of where users are at in the customer journey, there are actions you can take to help keep them for the long haul.
We’re excited to see how you retain more customers, drive down churn, and create a remarkable customer experience.
Is there any user retention strategies you’d add to this list? Let us know in the comments.
Today’s post was inspired by our first London workshop on growing faster through user retention. Check out the slides.